Gifting house deposit

zoelf

Hi everyone,

Looking for some help! It seems like we’re a few weeks away from exchanging contracts (we are first time buyers). We have a mortgage offer and everything was running smoothly!

My parents are helping us with a deposit (gifting), they have most of this money in their bank although was planning on getting a bank loan out as they want to keep this money in their bank.

Have now realised that no bank are happy to lend my parents money if they are gifting it to us as a deposit.

1. Is there any other way of getting around this?

2. If not, we now have to reduce our deposit. Will this be an issue with our mortgage provider and will it affect the sellers if we are reducing our deposit? (We preciously had a DIP with a reduction in our deposit but parents were happy to gift us more money)

Any help would be appreciated!

middleclassbutpoor

You have indicated it was affordable without...

Sounds like you will just need to apply for the mortgage on this basis if you parents cant gift you the money. As long as you can arrange this before exchange then it should be no issue.

I personally wouldn't be happy with my parents borrowing the money either but thats a personal choice.

If you can't get the mortgage without the gift from your current lender then you will need to go to another lender to get it. It is at this stage where you will need to make the sellers of the property you are buying aware as there will need to be another valuation.

zoelf

Thanks for replying, does It matter to the sellers what deposit we are offering? Do they not use our deposit for their deposit?

I’m sure our current lender will still give us the mortgage without my parents help, will we have to start the process again (another valuation) or do we update the lender and they just change the mortgage offer?

middleclassbutpoor

You need to normally submit your deposit to your solicitor as far as I know. Its been years since I was using cash in a property transaction.

Go back to your broker/lender and ask if it's possible to proceed without the gifted deposit but just the money you have. If you pass affordability etc then you just need to tell your solicitor the change of plans. I don't think the seller will care even if they are made aware, they still get their money on completion.

00ec25

middleclassbutpoor wrote: »

I don't think the seller will care even if they are made aware, they still get their money on completion.

the seller will care
as OP states, every £ less deposit OP pays is a £ more that the seller has to find themselves for their own deposit as the deposit money passes up the chain before completion

eddddy

zoelf wrote: »

2. If not, we now have to reduce our deposit. Will this be an issue with our mortgage provider and will it affect the sellers if we are reducing our deposit? (We preciously had a DIP with a reduction in our deposit but parents were happy to gift us more money)

zoelf wrote: »

Thanks for replying, does It matter to the sellers what deposit we are offering? Do they not use our deposit for their deposit?

Sounds like there's confusion about "mortgage deposit" and "exchange deposit".

They are completely different things.

If your parents gift you less money, you will have a smaller "mortgage deposit" - and you will need to borrow more mortgage money.

The mortgage lender will look at

• your affordability (they may decide that you cannot afford to pay back a bigger loan)

• the "loan to value" of the property you are buying. e.g. They might only be prepared to lend more than, say, 90% of the property's value

In general, buyers with smaller "mortgage deposits" are seen as higher risk. If the property is down-valued, or work is required on the property, they are more likely to walk away.


Edit to add...

As an FTB, the "exchange deposit" would typically only become an issue if you are borrowing more than 90% of a property's value. (e.g. if you have a 95% LTV mortgage)

middleclassbutpoor

00ec25 wrote: »

the seller will care
as OP states, every £ less deposit OP pays is a £ more that the seller has to find themselves for their own deposit as the deposit money passes up the chain before completion

I don't think it does - see post above.

I have no 'cash' in the game and Im going through a sale and purchase. My cash is in equity in my property.

I don't care how much money my buyer is putting into the deposit. I only care that when everyone completes, the money is available to complete the transaction.

zoelf

We previously had a DIP for 95% LTV before we went ahead with our formal offer of 90% so now hoping they will give us a 95% mortgage.

Before we apply for a new mortgage, I’m guessing this will be a problem with the sellers if we are only offering 5%?

Thank you for your replies